Allied Bakeries has been put up for strategic review in what parent company Associated British Foods (ABF) called a “very challenging market”.
ABF made the revelation today (29 April) as it disclosed results for the 24 weeks to 1 March, with revenues and operating profits down for the group as a whole and also for the grocery division that houses Allied Bakeries.
While sugar, part of ABF’s ingredients business unit, weighed on overall operating profit, Kingsmill and Sunblest brand owner Allied Bakeries pressured profits in grocery.
“Our UK-focused businesses declined overall. As expected, this was primarily due to lower volumes and sales in Allied Bakeries, which resulted in an increased operating loss,” ABF said in the commentary.
“Allied Bakeries continues to face a very challenging market. We are evaluating strategic options for Allied Bakeries against this backdrop and we expect to provide an update in H2 2025.”
Allied Bakeries also produces the Allinson’s brand but supplies UK retailers and supermarkets with private-label bread products as well.
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By GlobalDataABF, which also owns and operates the Primark clothing stores, does not break down the financial performance of Allied Bakeries or for other food brands within grocery such as Twinings tea and the Patak’s and Blue Dragon sauces lines.
Group results showed a 2% decline in sales to £9.51bn ($12.73bn) in the period to 1 March, while adjusted operating profit dropped 12% to £835m.
Profit before tax fell 21% to £692m with an EPS decrease of 8% to 83.6 pence.
ABF’s shares were down more than 6% at 2,091 pence as of 11:53 am BST in London today, eroding the year’s gain to 1.5%.
Post the results, Shore Capital has put ABF’s shares “under review” from a buy rating for the investment firm’s house stock.
Consumer goods analysts Clive Black at Shore Capital wrote in a research note today: “Allied Bakeries remains an unwelcome problem child with more demonstrative talk about solutions from management.
“As for grocery and ingredients, one or two frustrations aside, notably the long-running sore that is UK bakeries where strategic options are being examined, in truth, where we believe that the business has been earnestly seeking a better medium-term outcome, ABF has a strong portfolio of valuable brands…”
In terms of grocery, ABF’s sales revenue dropped 2% to £2.09bn. Operating profit was flat at £219m, while adjusted operating profit fell 1% to £227m.
ABF said it posted “good sales growth” in grocery “across most of our brands” with the exception of Allied Bakeries and the cooking oils business in the US, which includes the Mazola brand.
Group CEO George Weston said: “These results reflect a robust performance in four of our five divisions. I am frustrated with the results in our sugar business, but we are clear on what needs to be done by way of operational and regulatory solutions to improve financial performance.
“Looking ahead, in an operating environment with significant uncertainties, the group remains well positioned and our strong balance sheet enables continued investment to deliver long-term sustainable growth.”
ABF added in the results commentary: “We continue to expect overall performance this year to reflect the normalisation of profitability in our US-focused businesses and an operating loss in Allied Bakeries.”
